Spain announces £51bn cuts package
Spain's government has imposed further austerity on the country as it unveiled sales tax rises and spending cuts aimed at shaving 65 billion euro (£51 billion) off the state budget over the next two and a half years.
A day after winning European Union approval for a huge bank bailout and breathing space on its deficit programme, Prime Minister Mariano Rajoy warned Parliament that Spain's future was at stake as it grapples with recession, a bloated deficit and investor wariness of its sovereign debt.
"We are living in a crucial moment which will determine our future and that of our families, that of our youths, of our welfare state," said Mr Rajoy.
"This is the reality. There is no other and we have to get out of this hole and we have to do it as soon as possible and there is no room for fantasies or off-the cuff improvisations because there is no choice."
The announcement came as thousands of Spanish coal miners fearing for their livelihood because of huge cuts in subsidies set off fireworks as they marched up Madrid's main avenue to protest outside the Industry Ministry. The miners walked with relatives and sympathisers in the procession under a hot sun, and wore hardhats and carried walking sticks. The fireworks generated big puffs of smoke.
The spending cuts, designed to cut 65 billion euro off state budgets by 2015, include a wage cut for civil servants and members of the national parliament and a new wave of closures at state-owned companies. Spain will also speed up a gradual increase in the retirement age from 65 to 67.
The measures are in exchange for the bank bailout of up to 100 billion euro (£79 billion) granted to Spain by the other 16 countries that use the euro. Finance ministers approved the bailout program at meetings in Brussels this week and as much as 30 billion euro (£24 billion) could flow to Spain's banks by the end of the month.
The country's banks are saddled with billions of euros in toxic loans and assets following the collapse of the property market. The goal is to strengthen the banks' balance sheets against further economic shocks so they can start lending to businesses and families.
Spain - the fourth-largest economy in the eurozone - has been struggling to keep a lid on its government deficit in the midst of a recession while trying to support its troubled banking industry. There are fears that should Spain need a bailout of its own, the eurozone would struggle to finance it.
The jobless rate in Spain is nearly 25% and the forecast is for the economy to shrink 1.7% this year. The country is mired in its second recession in three years. The concern among investors and Europe-watchers is that further austerity cuts will push Spain's economy further into recession, making it even harder for the government to trim its deficit.